Cheap fares but passengers get limited services

Cheap fares but passengers get limited services

I. Christianto, Contributor, Jakarta

During an aerospace or aviation show, flying enthusiasts
enjoy jet fighters and other aircraft taking off, soaring and
playfully chasing each other through the sky.

Similar acrobatic maneuvers are apparent in the price war
between budget airlines.

Low-fare air carriers have been popular for some time
internationally, as well as in Indonesia, a country considered to
be one of the most prospective markets for the air transportation
business.

Call them what you will: low-cost, no-frills, discount,
best-deal, bargain, cut-rate, cheap-fare or budget airlines...
whatever takes your fancy.

Travelers can expect incredibly low-priced flights to an
increasing number of destinations across the archipelago,
including the popular and most profitable routes.

Competition in domestic-flight services will be fiercer from
day to day, especially with the operation of several new budget
airlines later this year. For many would-be fliers these new
airlines are a nice alternative to the bus, train or sea travel.

Indonesia's aviation sector has never been so good. In its
gloomiest period, the industry comprised of a limited number of
airlines, some plagued by financial problems. Now, there are
dozens of Indonesian air carriers. Compared to the old players,
these new companies are not only efficient but also more
creative.

Considering its size, location, huge population and growing
middle class, Indonesia is indeed an ideal market.

Indonesia expects to see tremendous growth in its domestic air
passengers in the coming years. Domestic air passengers totaled
about 17.46 million in 2003, up by 43.19 percent from 12.1
million in 2002. After a significant drop during 1997-1999, the
figure gradually increased to some 7.6 million passengers in
2000, and to 9.2 million in 2001. There was another increase to
12.1 million in 2002. Domestic air passengers are expected to
surge to 20 million this year.

Recent growth rates are much better than figures for the rest
of Asia and, indeed, the world. According to the International
Air Transport Association (IATA), Asian airline-passenger traffic
will rebound by 14 percent this year -- after declining 9.4
percent in 2003 due to the devastating fallout from the outbreak
of severe acute respiratory syndrome (SARS).

The projected increase in Asia is much higher than the
estimated growth of global-passenger traffic, which is expected
to reach 7 percent this year, compared to 2.4 percent in 2003.

Low fares offered by new budget carriers have contributed to
the promising growth rate in Indonesia.

The projected figure of 20 million air passengers this year is
still fairly small when compared with the some 210-million
population of Indonesia. No wonder that more companies are
planning to enter the air transportation business here.

The Indonesian National Air Carrier Association (INACA)
estimates that the total fleets of airlines will increase by 50
percent this year, creating a supply of between 60,000 and 70,000
seats per day, while the number of passengers is predicted to
rise to around 55,000 per day.

Based on a rough supply-and-demand figure, this sector will
remain promising. Competition among domestic carriers will,
however, be fiercer. Lion Air has announced its plan to reduce
fares by between 15 percent and 30 percent this year.

In the early 1990s, airfares offered by incumbent airlines
such as Bouraq, Dirgantara, Garuda, Merpati, Mandala and Pelita
were strictly controlled by the government.

With the increase in domestic airline operators, sharp
competition cannot be avoided. There are more than 25 airlines
operating, or intending to operate. They include Lion Air,
Jatayu, Star, Kartika, Batavia, Paradise, Riau, and Seulawah,
Trigana, Xpressair, Adam, Sriwijaya, Wings, Deraya, Lorena and
Efata. Due to this rivalry, sometimes ticket prices for the same
route can change twice within a week.

Usually, cheap fares carry many restriction, for
example, validity period (usually a cheap return ticket is only
valid for seven days after the departure date) and schedule (at
night or very early in the morning).

With such restrictions and limited services, low-cost airlines
are able to offer airfares up to 75 percent cheaper than those of
regular airlines.

The no-frills concept, which has been widely accepted in the
U.S. and Europe, has also proven to be a winner in Indonesia.

The fares offered by budget airlines could be as low as one-
third that of regular tickets. In the first week of March, for
example, a one-way Jakarta-Surabaya ticket is about Rp 180,000
(about US$21), Jakarta-Denpasar Rp 260,000, Jakarta-Medan Rp
295,000 and Jakarta-Pontianak Rp 215,000. In comparison, the
Jakarta-Surabaya ticket offered by an executive train is about Rp
220,000.

Some budget airlines, particularly those serving short-haul
routes, scrap the frills offered by standard carriers, such as
free meals, beverages, wine and in-flight entertainment,
including magazines, movies and music. Instead, some budget
airlines are charging passengers for these onboard services.

A leading and successful no-frills airlines in Europe,
Ryanair, even plans to get rid of "non-essential" facilities such
as reclining seats, head rests, seat pockets and window blinds.
It will also switch to leather upholstery, as these last longer
and are easy to clean. To encourage passengers to carry cabin
baggage, it might also charge to check in luggage.

While airlines are allowed the liberty to select their onboard
amenities, they are required to equip flights with seat belts,
environment control systems, lights and doors. Another major low-
cost carrier in Europe, EasyJet, has even cut the number of
toilets on its Boeing 737s from three to two.

It is not impossible that budget airlines in Indonesia will
also follow in stead, as serving passengers with only cabin
baggage will reduce handling costs and scrapping "non-essential"
facilities will reduce maintenance costs, while cutting down on
toilet stalls will provide more space for additional seats --
meaning increased revenue.

This is all about cost cutting which, in turn, should extend
savings to passengers.

Indonesian budget airlines should, however, be fair and open
about their low-cost services. Airlines must, for example, inform
passengers that the flight has limited services, so they will not
be disappointed when the usual services are not forthcoming. The
problem is, only a few customers fathom that the airlines they
are boarding are low-cost, no-frills, discount, best deal,
bargain, cut-rate, cheap fare or budget carriers.

As most of these new airlines do not have any spare aircraft
and also do not provide connecting flights with other airlines,
they should also inform passengers that a delay might be
expected.

Budget airlines must also convince customers that low fares do
not always mean low quality -- for example, the absence of
smiling, friendly staff -- or low safety, which is always number
one.

Most of the new airlines, which use a single aircraft family,
the Boeing 737, will continue to offer cheaper fares due to
advantages such as more economical leasing arrangements and fuel
prices.

It is useless for the government to try and control air fares,
as in setting minimum and maximum price limits, as industry
players will ignore them, as usual. Regulators can merely set
flight classifications, akin to starred hotel ratings, based on
price, amenities and facilities. It is also important to consider
the travel time of budget fares, that is, a two-hour flight time
is acceptable for cheap fares.

With proper information on budget airlines, more people will
hopefully be humming, I'm leaving on a jet plane...